Examination of Witnesses (Questions 464
WEDNESDAY 24 MAY 2006
24 MAY 2006 DR
Q464 Chairman: Good afternoon and
welcome. I am sorry that we are running slightly late. We had
two divisions in the House a while ago but should now have an
uninterrupted session. I must apologise in advance that I have
to go to the dentist at about four o'clock for an emergency filling,
so my colleague Joan Walley will take over the chair at that point.
There are lots of things that we would like to talk to you about
and we will deal with them as best we can. First, your industry
has published a sustainable aviation strategy. Between 1990 and
2004 emissions from UK domestic and international aviation have
more than doubled. Last year they were up by 14%. Is that a sustainable
Dr Sentance: I do not want to
get into a debate about the figures. I had not appreciated that
the increase was quite that significant. I think that the view
put across in the sustainable aviation policy deals with a number
of environmental, economic and social issues. Aviation generates
a lot of economic and social benefit and as an industry we recognise
that we have to deal with the environmental impacts we generate.
In the past we have had a record of dealing with noise. The noise
impact at Heathrow Airport, for example, has reduced very significantly.
What has been going up the agenda in recent years is the issue
of emissions, particularly local air quality round airports and
climate change. The view that is put across in this document is
that the UK aviation industry supports the incorporation of aviation
emissions trading as a way to limit the impacts. We support that
because that has been demonstrated by a number of studies to be
the most economically efficient and environmentally effective
way forward. The benefit of it is that if aviation emissions continue
to increase in the way they have in the past the industry will
have to purchase emissions reductions from other sectors and it
will also have an incentive to reduce its emissions through operating
emissions trading. We recognise the issue. The view we put forward
is that emissions trading is the way to address this issue in
Q465 Chairman: The difficulty about
that is that at best it will be several years before agreement
is reached on the basis on which aviation goes into emissions
trading. If that is the only suggestion from the industry about
adjusting this growing and perhaps quite urgent problem of increasing
emissions probably we will not see any impact from it for seven,
eight or nine years. If emissions go on increasing at the present
rate the problem will have become quite substantial.
Dr Sentance: I have come before
the Committee before on various inquiries and talked about this
issue. Since those hearings in about 2003-04 we have made a lot
of progress in getting emissions trading on the agenda for aviation.
It is now being actively supported by the European Commission
which is developing a proposal which will be put forward later
this year. While it may not be possible to hit the deadline of
2008 for the second phase of emissions trading in Europe, hopefully
something will be in place in Europe not long after that. If one
looks at where we were two or three years ago when people said
similar types of thingsthen a lot of progress had been
made. There is now also within ICAO, the United Nations body that
looks at environmental issues in relation to aviation internationally,
an emissions trading task force on which I represent the aviation
industry. That sets out guidelines for the application of emissions
trading within aviation more generally in the international arena.
I think that both internationally and in Europe we have made a
lot of progress in recent years.
Mr Essex: In support of that,
certainly the industry is not standing still. There are opportunities
to abate the amount of emissions created by aviation. A good example
would be the efforts to focus on the reform and improved efficiency
of the air traffic control system, namely the European SESAR project.
By our estimates, there would for example be an opportunity to
save about 8 or 9% of aviation emissions through an efficient
Q466 Chairman: If we look at it another
way, the IPCC estimated that in 1992 aviation accounted for 2%
of global carbon emissions. That is the equivalent, roughly speaking,
of the UK. One could say, therefore, that the industry could be
treated like a G8 country. Kyoto has set a framework for countries
to have targets to cut emissions. Do you accept that for your
industry? Is that an approach with which you would be happy?
Dr Sentance: If we operate within
the emissions trading scheme effectively that is what will need
to happen. There needs to be a cap and part of what has to be
agreed in Europe is what that cap is to be. We are assuming that
that will be a declining limit over time reflecting the requirements
of the general community that CO2 emissions need to
come down. When we look beyond 2012 and the next Kyoto agreement,
if we have a future agreement for climate changeI hope
that one will be agreed internationallyit may well make
sense to have something a bit more explicit for aviation than
exists in the current Kyoto treaty, which effectively leaves it
open to ICAO. I believe that as an industry we would want to be
fully engaged in the discussion on Kyoto II to get something that
was sensible for the industry as a whole.
Q467 Chairman: Despite your comment
about the progress that has been made in the past three years,
I think that underlines the tortuously slow process. I do not
in any way underestimate the complexity of trying to get agreement
on aviation, particularly if there has to be an allocation for
each country. The same IPCC report I mentioned estimated that
also taking account of non-CO2 effects in 1992 aviation
contributed 3½% of man-made global warming. Do you have an
equivalent figure for a more recent date?
Dr Sentance: I have a study here
conducted by scientists in EuropeRobert Sausen, Ivar Isaksen,
Volker Grewe, David Lee and various peoplewhich was called
the TRADEOFF project. It came up with an estimate that while over
time, reflecting some of the trends to which you have referred,
CO2 emissions had increased somewhat in their impact
on global warming the other effects had come down. For 2000 they
came up with an estimatethis was published in 2004, so
it is probably the most recent estimate that has been producedwhich
was roughly the same as the IPCC report in terms of total global
warming impact. That suggests that it is still a reasonable benchmark
to use. As you are probably aware, once one gets outside the CO2
impacts the scientific understanding of the effects becomes subject
to a greater degree of uncertainty and there is greater scope
for error, but its central estimate is virtually the same as set
out in the IPCC report for 1992.
Q468 Chairman: The IPCC projected
that CO2 emissions from aviation would rise by up to
as much 10 times the 1992 level by 2050. Is that a projection
with which you would agree?
Dr Sentance: I do not agree with
that as a projection. I do not think that was its central estimate.
In percentage terms I believe that its central estimate was an
increase from 2 to 5% of total CO2 emissions. Obviously,
it predicted some further increase in total CO2 emissions,
whereas we know that to stabilise the global atmosphere we probably
need to cut the total, but a figure of 10 times sounds to me to
be the upper end of the estimate, not the central forecast.
Q469 Chairman: What is the industry's
Dr Sentance: Different players
in the industry will predict different growth rates. Perhaps I
can give the view of British Airways and Mr Essex will give the
view of Easyjet. We believe that a long-term growth rate of air
travel of about 3 to 4% is a good benchmark. Historically, one
finds high growth rates but, looking forward, many of the markets
have generated a lot of that growth, for example the US and possibly
Europe in the future- those markets are maturing and growth rates
can be expected to be much lower. If one looks at fuel efficiency
trends, they are expected to increase by about 1 to 2%, so that
leaves one with an emissions growth of about 2%, or possibly in
a range of 1 to 3%, depending on whether one has low growth and
high fuel efficiency or high growth and low fuel efficiency. The
expectation of British Airways is that if we move into a situation
where we have emissions trading applied as an economic instrument
to deal with carbon emissions aviation will move into a lower
growth and higher fuel efficiency world, so it will probably be
towards the lower end of that range.
Mr Essex: I do not disagree with
that view. I think it is worth noting that historically the trend
has been for growth in aviation to track very closely economic
growth. In order also to make a realistic assessment of the future
one must also take a view on economic growth and then add in benefits
that one would receive from improved fuel efficiency.
Q470 Chairman: When can we expect
a fall in the absolute level of carbon emissions from aviation?
Dr Sentance: Forecasting the future
is a hazardous business. My background is economics where forecasting
is probably even more uncertain, but insofar as we can look at
the next 10 to 20 yearsfor example, we see the Government's
projections at about the time of the White Paperwe would
expect to see continued increases in emissions which reflect the
sorts of trends to which I referred. If we look beyond that there
is a possibility that the markets will further mature and that
new technologies will come along. We certainly encourage discussions
between aircraft manufacturers and fuel producers on the possible
extension of biofuels. One can envisage some technologies that
may come along in a 20 to 30-year timeframe that could begin to
reverse that increase. I think that the most likely scenario for
the next 10 to 20 years is a continued increase in emissions and
the question is: what will be the rate of growth?
Q471 Colin Challen: The UK industry's
sustainable aviation strategy has as its second goal "Aviation
incorporated into a global policy framework that achieves stabilisation
of greenhouse gas concentrations in the atmosphere at a level
that would prevent dangerous man-made interference with the climate
system." Can you state the industry's understanding of what
that stabilisation level would be in terms of parts per million
CO2 in the atmosphere?
Mr Essex: Given that this is a
global issue, I think that it is less the aviation industry's
view than the view of the scientists as to what that sustainable
level is. The thrust of the sustainable aviation strategy, therefore,
is to say that aviation will play its role in stabilising it.
Q472 Colin Challen: Does that mean
you would wait until you had an absolutely firm scientific opinion
on the subject?
Mr Essex: Not at all. I think
scientific opinion is clearly driving such outcomes as the ETS
which is established on the basis of capping or reducing the overall
Q473 Colin Challen: The strategy
document itself or perhaps a Civil Aviation Authority document
that I saw last year suggests that the aviation industry is looking
at a range of about 350 to 750 parts per million which I think
is a little on the excessive side. If one does not settle on a
particular level how can one plan to tackle the issue of carbon
Dr Sentance: I think that the
main thrust from the industry is to accept the scientific evidence.
For example, I believe that a figure of 550 parts per million
has been quoted and used for UK policy-making. We would not demur
from that or seek to impose a different view. Our position is
that this is a global issue. If one talks about carbon dioxide,
aviation is a small but growing part of that. What we want to
do is to get inside a framework which will allow sensible economic
and environmental decisions to be made so that we can be playing
our part in limiting emissions while respecting the fact that
society also sees a lot of economic and social benefit from air
travel and we can strike the right balance between the environment
and social impacts.
Q474 Colin Challen: You are right
that the fairly standard view at the moment is 550 parts per million,
but the Tyndall Centre suggests it should be 450 parts per million.
The centre has made some projections to show that the impact of
aviation, not even including the radiative forcing factor, can
do a great deal to knock out all the gains made elsewhere in the
UK domestic economy and all the other things that we are doing
in the climate change programme to reduce emissions. What do you
say to that argument?
Dr Sentance: I do not agree with
its analysis. We would use the UK's figure of a 60% total reduction
that we might look for by 2050 as a good benchmark. I think that
that is consistent with 550 parts per million.
Q475 Colin Challen: Do you agree
there is a lot of evidence now emerging to show that 60% is quite
an old figure and needs to be increased?
Dr Sentance: I am not sure that
is the case. It is a big challenge for all sectors of the economy;
this is not specific to aviation. To make that 60% reduction will
be a big challenge and that is a target to which we should work.
If I may just comment on the analysis by the Tyndall Centre, together
with a colleague in British Airways we have written a short article,
which I would be happy to send to the Committee, that looks at
the framework of future growth emissions that I have just outlined
and how that relates to the figures at which Tyndall arrived.
We came up with a rather different conclusion, namely that even
in 2050 if there is a 60% cut in emissions aviation will account
for possibly 10 to 20% of the total. I am happy to share that
with the Committee. But the main point is that there is a lot
of uncertainty about growth rates for various different activities
as one goes into the future. The key challenge is to get into
a framework where we can deal with our emissions in a similar
way to other sectors. The framework that we look for in respect
of carbon emissions is a trading framework. We hope that in the
next few years within Europe we can take the first step in that
direction. We believe that that would be a good achievement on
behalf of the industry.
Q476 Mr Hurd: Perhaps we can explore
a little the existing incentive to your industry to improve fuel
efficiency. Broadly, what proportion of your costs is taken up
Mr Essex: You are probably aware
that in the past year the cost of fuel has doubled, so we are
trading nearer to 25 to 30% of our cost base.
Dr Sentance: For British Airways
it is getting up towards that; it is probably 20 to 25%. The norm
is more like 10 to 15%. I am hesitant to say "normal fuel
prices"; I am talking about the price of fuel in 1990s. It
has gone up to 20 to 30%, depending on what airlines you are looking
at and their operations.
Q477 Mr Hurd: What proportion of
your respective fleets would you expect to be replaced on a 10
to 15-year view, and what levels of relative fuel efficiency would
you expect from the new fleet in that timeframe?
Dr Sentance: The figures that
I quoted beforethe 1 to 2% a year improvementwould
give one something like 30 to 35% in a 25-year period as a central
estimate of fuel efficiency improvement. That is the sort of period
during which we would look at replacing aircraft. We would want
to replace them when they get to about 20 years of age.
Q478 Mr Hurd: But from where we are
today over the next 10 to 15 years what proportion of the fleet
of British Airways would be replaced?
Dr Sentance: I am not at liberty
to give you any figures. As you may be aware, we are thinking
about fleet issues at the moment, so it is a rather sensitive
matter. I do not want to give you figures and create any hostages
to fortune. I think you can get a flavour of it from the fact
that aircraft are kept for about 20 years. In 10 to 15 years one
might turn over half one's fleet, perhaps a bit more.
Mr Essex: The low fare industry
is in a slightly different position, it being a younger industry.
Many of the low-fare airlines have acquired new aircraft from
day one, so in that respect they are already operating the most
environmentally efficient and cleanest aircraft. We are really
looking to manufacturers to introduce new models. Our understandingnothing
is firm yetis that Airbus is already contemplating new
models in the 2012 to 2016 timeframe. Certainly, given the advent
of an ETS our evaluation of those products, therefore, will include
the monetised effects of emissions. Quite simply, we shall not
be taking out our chequebooks to acquire those aircraft unless
they show a step change performance in fuel efficiency.
Q479 Mr Hurd: There is an argument
that governments should not give as big a green light as has been
given in this country to the expansion of your industry until
there is more material evidence of technology progression. What
is your view on that?
Mr Essex: I just go back to a
point made earlier. The growth in the industry is not out of control;
it is not some spurious thing that just occurs because we decide
to put on extra capacity. The industry is quite well disciplined.
The shareholders put in capital and expect a return, so there
is a very strong correlation with economic growth. I suppose our
view would be that if, for example, airport capacity is not provided
in this country it will be provided in other countries. One is
then in a situation where because there is a natural demand people
will fly to that second country to get to their destinations.
If you like, you are creating more emissions because you are not
servicing the natural demand in the most efficient way.
Dr Sentance: I believe that as
a policy it would be the wrong to say that there should be no
expansion on environmental grounds. That seems to me to be going
back to a strand of thinking in the 1970s that somehow we cannot
have economic growthwhich is the thing that drives the
expansion of aviationbecause of environmental issues. The
stance we take in relation to Heathrow, where expansion is most
important, is that as part of the process by which the Government
gives approval to expansion we expect to have to demonstrate as
an industry that we can deal with the environmental issues that
arise. At Heathrow that involves making sure that we do not add
to the noise issues and create a worse air quality situationhopefully,
the noise and air quality will continue to improve in terms of
the social impactsand that we have a proper mechanism in
place to deal with the climate change impacts. The conclusion
which government came to in the White Paper, which we support,
is that the right mechanism should be based on emissions trading
and the first step should be through incorporating it into a European
emissions trading scheme. I think that if those three conditions
are in place and there is a process to deal with the noise, air
quality and the climate change impact it is quite legitimate to
say that on that basis the industry should be allowed to expand
and deliver the economic benefits that that produces.